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File Sharing and Film Revenues: Estimates of Sales Displacement at the Box Office

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  • McKenzie Jordi

    () (Faculty of Business and Economics, Macquarie University, Sydney, Australia)

  • Walls W. David

    (University of Calgary, 2500 University Dr NW, Calgary, AB T2N 1N4, Canada)

Abstract

This study examines the impact of peer-to-peer (P2P) file sharing on the Australian theatrical film industry. Using a large data set of torrent downloads observed on three popular P2P networks, we find evidence of a sales displacement effect on box office revenues. However, although statistically significant, the economic significance of this displacement appears relatively small. To establish causality, we make use of the state-day-level panel data structure permitting the use of film fixed effects to help mitigate the endogeneity between film revenues and downloads. To further assist identification, we propose a downloading cost function that considers other states’ downloading activities as a proxy for the number of peers in the download swarm; the US DVD release date as a supply shock to P2P networks; and the substantial structural progression within the Australian internet service provision industry that occurred over the sample period. We observe that the release gap between the US and Australian markets is a key contributor to piracy early in a film’s theatrical life. This finding provides a partial explanation for the industry’s move towards coordinated worldwide releases.

Suggested Citation

  • McKenzie Jordi & Walls W. David, 2016. "File Sharing and Film Revenues: Estimates of Sales Displacement at the Box Office," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(1), pages 25-57, January.
  • Handle: RePEc:bpj:bejeap:v:16:y:2016:i:1:p:25-57:n:8
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    References listed on IDEAS

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    1. Jordi McKenzie, 2012. "The Economics Of Movies: A Literature Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 26(1), pages 42-70, February.
    2. Hansen, Lars Peter, 2012. "Proofs for large sample properties of generalized method of moments estimators," Journal of Econometrics, Elsevier, vol. 170(2), pages 325-330.
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    7. Lonnie Stevans & David Sessions, 2005. "An Empirical Investigation Into the Effect of Music Downloading on the Consumer Expenditure of Recorded Music: A Time Series Approach," Journal of Consumer Policy, Springer, vol. 28(3), pages 311-324, September.
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    9. de Roos, Nicolas & McKenzie, Jordi, 2014. "Cheap Tuesdays and the demand for cinema," International Journal of Industrial Organization, Elsevier, vol. 33(C), pages 93-109.
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    11. W. D. Walls, "undated". "Bestsellers and Blockbusters: Movies, music, and books," Working Papers 2012-09, Department of Economics, University of Calgary.
    12. Brett Danaher & Michael D. Smith & Rahul Telang & Siwen Chen, 2014. "The Effect of Graduated Response Anti-Piracy Laws on Music Sales: Evidence from an Event Study in France," Journal of Industrial Economics, Wiley Blackwell, vol. 62(3), pages 541-553, September.
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    Cited by:

    1. McKenzie, Jordi, 2017. "Graduated response policies to digital piracy: Do they increase box office revenues of movies?," Information Economics and Policy, Elsevier, vol. 38(C), pages 1-11.

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